Pinnacle Financial Partners (PNFP)

Regional banking company Pinnacle Financial Partners (NASDAQ:PNFP) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 16.7% year on year to $544.8 million. Its GAAP profit of $2.19 per share was 7.8% above analysts’ consensus estimates.

Company Overview

Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ:PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Pinnacle Financial Partners competes with regional banks like First Horizon (NYSE:FHN), Regions Financial (NYSE:RF), and Truist Financial (NYSE:TFC) in the Southeast, as well as national banks including Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) that operate in its markets.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Pinnacle Financial Partners grew its revenue at an excellent 12.8% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Pinnacle Financial Partners’s annualized revenue growth of 9.4% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Pinnacle Financial Partners reported year-on-year revenue growth of 16.7%, and its $544.8 million of revenue exceeded Wall Street’s estimates by 4.8%.

Net interest income made up 74.4% of the company’s total revenue during the last five years, meaning lending operations are Pinnacle Financial Partners’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Markets emphasize efficiency ratio trends over static measurements, recognizing that revenue compositions drive different expense bases. Lower efficiency ratios signal superior performance by indicating that banks are controlling costs effectively relative to their income.

Over the last four years, Pinnacle Financial Partners’s efficiency ratio has increased by 7.8 percentage points, going from 49.5% to 57.3%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, Pinnacle Financial Partners’s efficiency ratio was 55.6%, close to analysts’ expectations. This result was in line with the same quarter last year.

For the next 12 months, Wall Street expects Pinnacle Financial Partners to rein in some of its expenses as it anticipates an efficiency ratio of 55.9%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Pinnacle Financial Partners’s EPS grew at an astounding 15.2% compounded annual growth rate over the last five years, higher than its 12.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Pinnacle Financial Partners, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q3, Pinnacle Financial Partners reported EPS of $2.19, up from $1.86 in the same quarter last year. This print beat analysts’ estimates by 7.8%. Over the next 12 months, Wall Street expects Pinnacle Financial Partners’s full-year EPS of $7.87 to shrink by 16%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Pinnacle Financial Partners’s TBVPS grew at an incredible 11.4% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 11.8% annually from $49.24 to $61.53 per share.

Over the next 12 months, Consensus estimates call for Pinnacle Financial Partners’s TBVPS to remain flat at roughly $61.52, a disappointing projection.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Pinnacle Financial Partners has averaged a Tier 1 capital ratio of 10.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Pinnacle Financial Partners has averaged an ROE of 9.7%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Pinnacle Financial Partners.

We enjoyed seeing Pinnacle Financial Partners beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $90.25 immediately following the results.

Updated: December 3, 2025 at 11:51 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Pinnacle Financial Partners, you should also grasp the company’s longer-term business quality and valuation.

Pinnacle Financial Partners isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was solid over the last five years and is expected to accelerate over the next 12 months, its estimated sales for the next 12 months are weak. And while the company’s estimated net interest income growth for the next 12 months is great, the downside is its worsening efficiency ratio shows the business has become less productive.

Pinnacle Financial Partners’s P/B ratio based on the next 12 months is 1.1x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $107.81 on the company (compared to the current share price of $94.10).